Description
The marketing mix provides a way to position a business competitively in its markets. The first part of this article efines and discusses the traditional components of the mix. Each of the 4 Ps (product, price, place, promotion) is viewed, and their places in the marketing mix are illustrated, with well known companies being used as examples.
MARKETING
MANAGEMENT QUARTERLY PART 9 OCTOBER 2000 FACULTY OF FINANCE AND MANAGEMENT 14
MANAGING THE MARKETING MIX
Susan Baker
Lecturer in Marketing,
Cranfield School of
Management
[email protected]
© 2000 Susan Baker
Managing the
marketing mix 1
The marketing mix provides a way to position a business
competitively in its markets. The first part of this article defines
and discusses the traditional components of the mix. Each of
the 4 Ps (product, price, place, promotion) is reviewed, and
their places in the marketing mix are illustrated, with well
known companies being used as examples.
Introduction
The subject of this two-part article is the
creation of customer value through the use
of the expanded marketing mix.
Traditionally, the marketing mix has been
popularly described as the ‘4 Ps’ (product,
price, place, promotion) (see Figure 1).
However, marketers have long been
concerned about the adequacy of these
labels, as the sets of activities that they were
originally introduced to describe have
expanded beyond the boundaries of the
terms. For example, ‘place’ covers the
domain of routes to market, and it now
embraces channel management, logistics
and supply chain management. ‘Promotion’
also more usually refers to the total
communications mix today.
This first part of the article considers each of
the four marketing elements from a relation-
ship marketing perspective, getting to grips
with the differential advantage provided by
each of the individual components.
The second part of the article (to be
published in MQ10) will argue for the
incorporation of three additional
marketing mix elements :
I customer service;
I people;
I processes.
The tenets of relationship marketing
(covered in MQ5 by Mitchell (1999)) are
shown to support the belief that marketing
relies on more than just the creation of
customers and the generation of sales; it also
depends on enduring relationships born of
trust and mutual benefit.
The marketing mix essentially provides
marketers with the necessary levers to
manoeuvre the business into a more
competitive position, and the salient issues
relating to each of the elements are covered
in turn. Complexity arises in managing all of
these together at the same time, and the
concluding section in the second part of the
article therefore provides some cohesive
insights.
Product strategies
The Ansoff matrix was introduced in MQ8
by Palmer (2000) as a marketing diagnostic
tool that has wide application. It is particu-
larly helpful in structuring future product
and market opportunities. In terms of
Classic marketing mix
Place Promotion
Price Product
£$
Figure 1 Classic marketing mix
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product strategy, it is concerned with the
product development process, from the
earliest stages of development through to
the introduction of the product into the
marketplace.
Understanding what is meant by the term
‘new product’ is fraught with difficulties.
For example, is a new product from the
customer’s point of view one that delivers
benefits not previously obtained, or is it one
that delivers them in a more advantageous
way ? Alternatively, from the manufacturer’s
viewpoint, is a new product an established
product with an additional product line
variant that requires separate storage,
handling or management ?
New product development (NPD) has
traditionally been seen as a sequential
process, with functional departments getting
involved at appropriate intervals. The
product is effectively passed from depart-
ment to department. This approach is typical
of a functionally organised, manufacturing
oriented business.
Speed to market is of the essence for
successful NPD. McKinsey & Company has
estimated that high technology products that
arrive to market on time, but are 50% over
budget, earn only 4% less profit over a five
year period. Products that are on budget but
are six months late earn 33% less profit over
the same period.
In the rush to be first and best, the manage-
ment of a number of factors, including the
following, is critical :
I Time to market : How can the
opportunity for profit be maximised ?
I Trend to mass customisation : How can
production costs be driven down while
more individual demands are met ?
I Technology : How can businesses keep
pace with technology ?
In response to these management challenges,
many organisations are now re-engineering
their NPD activities and formalising them
into a structured process.
Robert Cooper, an academic researcher in
this field, has developed the concept of the
stage–gate process (see Cooper (1993)). NPD
activities are formalised and subdivided into
a series of stages, so that managers ‘own’
specific groups of activities, and are
responsible for achieving the objectives
within those activities (see Figure 2). Before it
can progress to the next stage, the product
must be assessed against the objectives set for
that stage. Failure at any stage of the process
results in the conclusion of the development
of the new product.
For pharmaceutical organisations such as
SmithKline Beecham, the fact that they
manage this process in global teams and
work many years in advance of launch onto
Ideation
Gate
4
Gate
5
PIR
Gate
1
Gate
2
Gate
3
Stage
1
Stage
2
Idea
Initial
screen
Preliminary
investigation
Second
screen
Detailed
investigation
(build business
case)
Decision on
business case
Stage
3
Stage
4
Stage
5
Development
Postdevelopment
review
Testing and
validation
Precommercialisation
business analysis
Full production and
market launch
Post-
implementation
review
Figure 2 Stage–gate process
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MANAGING THE MARKETING MIX
the marketplace highlights the importance
of using an explicit and clearly defined
approach. Pilkington (the inventor of float
glass) believes that a benefit of this approach
is that it improves communication between
the various functions.
Product policies, however, do not draw to a
close once a new product has been brought
to market. A new product will most certainly
become part of a range of products and
services marketed by the same firm, and this
raises a number of fundamental questions :
I When should new products be
introduced ?
I When should old products be deleted ?
I Which products should be offered in
which markets ?
I How many products are needed ?
I How should products be differentiated
within the range ?
I How should the range be managed for
continuing profit ?
A key tool for guiding this analysis is the
product profitability lifecycle, which
illustrates profitability over the lifetime of
the product (see Figure 3).
In summary, like other elements of the
marketing mix, product strategies need to be
embedded in the organisation as an ongoing
marketing process.
Pricing strategies
Price is the element of the marketing mix
that has the most direct effect on the bottom
line of the business. Many marketers view
this particular lever as being easy, quick and
flexible to use in the battle to capture
customers. However, using price as the
weapon of choice can lead to price wars
which can have a detrimental effect on
profitability, often for the entire industry
sector.
Additionally, price has become very much a
‘top of mind’ concern for companies seeking
to build online businesses, because, as
everyone knows, the Web allows prices to be
compared much more easily. Customers can
gather information on relative prices,
features and quality in much greater detail
than ever before and far more quickly, with a
few effortless keystrokes. It has become
critical, therefore, that managers be quite
clear about their strategic goals and how they
wish to achieve them when setting price
levels.
It is for these reasons that we should
reconsider some of the fundamentals of
pricing.
Firstly, price plays a pivotal role in marketing
exchanges, and managers need to be aware
of the elements that make up both sides of
the equation for their particular business.
Figure 4 shows the sort of costs that the
customer is interested in. However, all too
often, companies assume that customers are
interested in their costs of doing the business,
and they pursue cost-plus strategies (where a
fixed percentage margin is applied to the
costs of each product).
Too often, companies take a cost-plus
approach to pricing because they are
Research and
product
development
Revenue
Profit
Loss
Profit
Product
introduction
Figure 3 Product profitability lifecycle
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ignorant of the need for a detailed under-
standing of these customer-side elements, or
because a cost-plus strategy has an inherent
appeal as there is usually more certainty
about costs than about demand. Prices
become easier to justify (‘I’ve got to cover all
my costs, after all’), and this approach
should deliver profitability. However, this
approach
I is highly dependent on the correct
allocation of costs within the business;
I ignores customer attitudes to price;
I is completely passive;
I ignores marketing objectives;
I can lead to the sub-optimisation of
profits.
A cost-plus strategy is an ‘inside–out’
approach. A marketing-led pricing policy is
driven from the ‘outside–in’, that is, prices
are set on the basis of an understanding of
what the market will bear. This entails the
gathering of data using techniques that may
range from simple price sensitivity tests to
trade-off analyses where prices are researched
among potential customers for various
bundles of benefits associated with the
product or service under investigation. Most
organisations brief outside research agencies
to carry out this type of work for them.
When entering a market for the first time,
marketers tend to follow one of two
dominant pricing strategies :
I penetration;
I skimming.
It has been suggested that a penetration
strategy (that is, a low relative price) is a
route to early gains in market share if
I demand is price sensitive;
I economies of scale exist;
I competitive imitation is not difficult.
An example of this strategy is the low price
that has been established for initial sales of
domestic television satellite dishes and
decoders.
Alternatively, it is argued, a skimming
strategy (that is, a high relative price) may
be appropriate where
I demand is not particularly price sensitive;
I there is a relatively flat cost curve (that is,
unit costs at low volumes are not very
much higher than unit costs at higher
volumes);
I there is limited danger of competitive
imitation.
In conclusion, the pricing decision is one of
the most important issues to be faced by the
marketer, and it should never be considered
as anything less than strategic in nature.
Place strategies
The outlets at which products are made
available logically determine where
customers buy the company’s products.
Typically, many companies do not give
much attention to the question of channel
choice, as this is not regarded as a variable in
the marketing mix. More often than not, the
distribution channel will have developed its
current form as a result of unplanned and
haphazard development.
As the work of Martin Christopher, a leading
academic in this field, shows (see the further
reading), such disregard for this vital area of
marketing discretion means that many
opportunities for profitable market potential
are passed over.
For instance, an international chemical
company selling into Europe, using its own
sales force to sell direct to customers, found
that by using a chemical merchant, or
middleman, it could reduce its own sales
costs and take advantage of a ready-made
sales organisation with a host of local
contacts.
Figure 4 The pivotal role of price in
marketing exchanges
Consumer costs
Money
Time
Cognitive activity
Behaviour effort
Business costs
Production
Promotion
Distribution
Market research
+ +
Profit Value
= =
Price willing to
pay
Price at which
willing to sell
Marketing
exchange
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MANAGING THE MARKETING MIX
This example demonstrates the benefits of
taking a fresh look at marketing channels,
and in this digital age there are now more
compelling reasons to reappraise channel
strategy. Fundamental to this reappraisal
process is an exploration of the route by
which the customer acquires the product or
service, and a comparison of the costs and
benefits of other distribution options.
Many companies do not rely on a single
channel of distribution, but prefer instead to
use multiple channels. They may choose
different channels to reach different market
segments or, alternatively, they may
approach a single market via a dual
distribution channel.
In such cases, it is important to ensure that
there is no conflict between the channels,
particularly in terms of price competition.
For example, organisations setting up online
channels to complement existing options
need to ensure that established business is
not adversely affected by potentially lower
prices offered through the online channel.
Ultimately, the choice of channel(s) must be
based on the long-term balance between the
benefits and the costs of that choice. What
should be taken into consideration here ?
The potential benefits of using
intermediaries include the following :
I access to markets;
I economies of scale through
consolidation/final product
configuration;
I selling and promotion;
I provision of trade credit;
I holding of inventory;
I installations and customer training.
On the other hand, the costs of using
intermediaries are
I the margin forgone (the channel margin
can be defined as the difference between
the price in the final market and the
price paid to the manufacturer);
I a possible loss of opportunity, as the
intermediary may not necessarily support
or promote the product to the desired
extent because of competing priorities.
For many years, there was little innovation
in distribution channel structure. Organisa-
tions assumed that distribution channels
were, by their very nature, fixed and difficult
to change. However, in recent years, a
number of significant developments have
taken place that are now transforming the
shape of many distribution channels.
The rapid growth of the Internet is a classic
example of how technology is forcing the
pace of change. One of the biggest effects of
Web-based business has been an acceleration
of the trend towards disintermediation, or
the removal of intermediaries between the
supplier and the ultimate consumer.
(Intermediaries have been referred to by one
senior manager as ‘speed bumps on the way
to the consumer’.)
This tendency has significant implications
for business. For example, the traditional
travel industry is under threat from Web-
based businesses that allow consumers to
research, compare information about, and
ultimately book, their own holidays.
The other key development in channel
management is the emergence of world-
wide express delivery services offered by
companies such as DHL and Federal Express.
These have led to the appearance of new
direct-to-customer distribution channels.
Dell Computers, for example, has achieved
a leadership position through the use of
quick response logistics and supply chain
strategies.
The implication of all of this is that channel
strategy must be kept under constant review,
and there must be ongoing evaluation of the
efficiency, effectiveness and sustainability of
current channels. Figure 5 summarises the
key questions that need to be asked.
Promotion strategies
Business today is more communications
dependent than ever before. Over the last
decade, the field of marketing communica-
tions has seen many dramatic changes, not
least of which have been the advancements
in marketing technologies. The Internet,
smart cards, customer databases, easily
accessible data warehousing, and cost-
effective direct mail have all contributed to a
huge increase in the amount of information
exchanged between companies and their
customers.
For example, when Tesco’s loyalty card was
launched in 1995, it was estimated that the
data generated by the company in one
week about its customers’ behaviour was
equivalent to the total amount of
information available on the Internet at that
time.
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These technological advances, coupled with
consumer empowerment, media fragmenta-
tion and the ubiquitous pressure on
marketers to justify the returns on marketing
communications expenditure are intensify-
ing the need to re-examine exactly how
marketers plan and implement their
communications strategies.
As marketers have moved away from
traditional ‘admass’ strategies towards
those that are more personalised, customer
oriented and technology driven, integrated
marketing communications (IMC) has
emerged as a best practice concept.
IMC is defined as the strategic co-ordination
of all marketing messages and the alignment
of all methods of communicating with
customers, be they consumers or other
targeted, relevant (internal and external)
audiences. Marketers aim to achieve both
creative harmonisation and co-ordination of
the promotional tools employed.
In the UK, one brand in particular demon-
strates the process of creative integration. It
also clearly illustrates the marketing thinking
that acknowledges that people form their
images of brands and companies from
information provided through a variety of
Effectiveness:
How well do your channels cover
the market?
How well do your channels meet
your customers’ needs?
Are your channels building a
competitive advantage for you?
Sustainability:
Who ‘owns’ the customer – you or
your channel?
Are your channel partners earning
adequate returns?
Are you participating in channel
innovations?
Channel management
Efficiency:
How competitive is the total system (you and your channel)?
Are you getting the best possible share of the surplus created
in the system?
Figure 5 Key questions in channel management
sources. The brand is Tango, a carbonated
soft drink that for decades languished in the
portfolio of ‘fizzy non-colas’.
In the mid1990s, an innovative IMC
campaign led by the agency HHCL drove the
brand forward, to the extent that, today, the
soft drinks mental map of consumers
comprises colas, fruit-based non-cola drinks,
and Tango. Previously, it consisted of only
two categories : colas and fruit-based non-
colas. Using a suite of media (television and
cinema advertisements, public relations,
trade marketing, and on-pack offers), Tango
conveyed a set of values built around
‘irreverence’ and ‘idiosyncrasy’ that were in
touch with the brand’s consumers.
Making IMC work is a complex business.
Cranfield School of Management research
has shown that marketers overwhelmingly
believe that the orchestrating role has to be
undertaken by the marketers themselves.
Indeed, 60% of research respondents felt that
they could manage an IMC programme more
effectively than their agencies could. It was
the view of some marketers that the
agencies’ obsession with advertising creation
has allowed new competition, in the form of
management consultants, to enter the
marketing communications field.
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MANAGING THE MARKETING MIX
An analysis of the case of Stella Artois, a top
ten UK brand marketed by the Whitbread
Beer Company as a ‘reassuringly expensive’
lager, throws up some of the key issues in
managing an IMC strategy. In 1997,
£25 million was spent on a campaign based
around film (which research had indicated
was an important part of the lifestyle of
Stella’s target consumers : men aged 18–34.).
The main agencies involved were HH&S
(sales promotions), Lowe Howard Spink
(advertising), Motive (media buying), Cohn
& Wolfe (consumer PR) and Bryant Jackson
(trade PR). HH&S were appointed as the lead
agency. All brand activities were focused on
the central proposition, which had delivered
positive sales results. However, managing the
collaborative efforts of such a diverse team
threw up some key issues. These revolved
around the following :
I managing agency egos and turf wars;
I integrating value systems among all the
contributing parties;
I managing remuneration (commission-
based versus fees);
I measuring IMC effectiveness.
In conclusion, IMC moves the concept of
‘promotion’ on considerably, into the 21st
century, where success in communications
strategy lies in the notion of simplicity and
synergy across all activities.
Summary
The description of the classic marketing mix
commonly known as the 4 Ps dominated
marketing thinking for decades, even though
most marketers were aware that the labels
did not quite fit in reality.
With the advent of a relationship marketing
approach to the discipline in the early 1990s,
the classic marketing mix was expanded to
take account of the influence of people,
processes and the provision of customer
service, which were known to play an
equally important role in making marketing
work in practice. These three further
elements will be considered in the second
part of this article.
References
I Winning at New Products : Accelerating
the Process from Idea to Launch
Cooper, R G (1993) Addison–Wesley
(2nd edn.)
I ‘Relationship marketing’
Mitchell, R Management Quarterly Part 5
(1999) pp 16–22
I ‘The marketing toolkit’
Palmer, R Management Quarterly Part 8
(2000) pp 17–24
Further reading
This article has drawn on the work of the
Cranfield Marketing & Logistics Group
published in Cranfield School of
Management (2000). The relevant chapters
are Palmer (2000) (for further reading, see
Cooper (1993) in the above references for
more on the stage–gate process), Christopher,
Chapter 10 (2000) (for further reading,
Martin has written prolifically on this
subject, and I recommend Christopher
(1998)), Christopher, Chapter 11 (2000) (for
further reading, if you want a handbook on
pricing, then try Nagle (1987)) and Mitchell,
H (2000).
I Logistics and Supply Chain Management
Christopher, M (1998) Pitman
I ‘Managing logistics and channels’
Christopher, M in Marketing Management :
Relationship Marketing Perspective Cranfield
School of Management (2000) Macmillan
(Chapter 10)
I ‘Pricing strategy’
Christopher, M in Marketing Management :
Relationship Marketing Perspective Cranfield
School of Management (2000) Macmillan
(Chapter 11)
I Marketing Management : Relationship
Marketing Perspective
Cranfield School of Management (2000)
Macmillan
I ‘The communications mix’
Mitchell, H in Marketing Management :
Relationship Marketing Perspective Cranfield
School of Management (2000) Macmillan
(Chapter 13)
I The Strategy and Tactics of Pricing
Nagle, T (1987) Prentice Hall
I ‘New product development and
product policy’
Palmer, R in Marketing Management :
Relationship Marketing Perspective Cranfield
School of Management (2000) Macmillan
(Chapter 9)
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MANAGING THE MARKETING MIX
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© 2001 Susan Baker
Susan Baker
Lecturer in Marketing,
Cranfield School of
Management
[email protected]
The first part of this article (see Baker (2000)
in MQ9) considered in turn each of the four
elements (known as the 4Ps) that comprise
the classic marketing mix. As a unity, these
provide a way to position a business in its
markets.
This second part of the article brings the
concept of the marketing mix up to date by
introducing three additional elements.
Their inclusion reflects the move to market-
ing strategies founded on building better
relationships rather than simply carrying
out more transactions. Customer service,
people and processes are therefore drawn in
as being levers that are equally important
in manoeuvring a business into a more
competitive position (see Figure 1).
The article concludes with some key insights
into managing the mix as an entity.
Customer service strategies
Companies that excel at customer service
I develop innovations and generate
energies that win new customers while
retaining existing business;
I manage to keep all their customers
satisfied;
I do it better than their rivals.
These are companies that accept that
customers are becoming increasingly
sophisticated and demanding in terms of
their service requirements and expectations.
They realise that increases in customer
satisfaction and retention can have a
significant impact on company profitability
and corporate success.
Despite that fact that customer service can
provide companies with such obvious
advantages, customer care activities generally
do not match either customers’ expectations
or companies’ aspirations. In many
companies, customer care practices amount
to reactive ‘fire fighting’, and customer
service is often seen as the handling of
customer complaints, rather than the
management of customer relationships.
This, of course, assumes that customers
complain in the first place. Studies have
shown that 98% of dissatisfied customers
never complain when they receive poor
service, but that, as a result, 90% of them
will not return to the disappointing supplier
Managing the
marketing mix 2
The marketing mix provides a way to position a business competitively
in its markets. The traditional components of the mix, the 4 Ps, were
examined in the first part of this article. Here the Ps are extended to
include customer service, people and processes. Each of these is
explained as a way of differentiating the company and increasing the
value of its marketing activities.
Customer
service
People
Processes
Product
Promotion Price
Place
Figure 1 The expanded marketing mix
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MANAGING THE MARKETING MIX
in future. Furthermore, customers who are
dissatisfied are likely to tell at least ten
others about their poor service experience.
The development of a customer service
strategy involves four key steps, as outlined
by Martin Christopher (Christopher (1992)) :
1. Identifying a service mission : The company
should articulate its service pledge and
values within its corporate mission and/
or in a separate customer service mission
statement. This declaration should focus
on the unique and distinctive elements of
the company’s offer while reflecting the
company’s philosophy and commitment
to customer service.
2. Setting the customer service objectives : The
company’s objectives, or goals, must be
clearly defined and fully understood if
effective strategies are to be developed. In
terms of customer service, this involves
answering questions such as the
following :
G How important is customer service in
comparison with the other elements
of the marketing mix ?
G With what other businesses does the
company compete in the customer’s
mind ?
G Which are the customer service
elements that contribute most to
overall customer satisfaction and
market share ?
G What dimensions of service are seen
as priorities by customers when they
choose suppliers ?
G How does the business perform
against its competition ?
In considering levels of performance in
setting these customer service objectives,
service providers must consider the
importance of service quality variables
such as the following :
G reliability : the ability to perform the
promised service dependably,
accurately and consistently over time;
G responsiveness : prompt service and a
willingness to help customers (speed
and flexibility are essential here);
G assurance : the knowledge and
courtesy of the staff, and their ability
to inspire trust and confidence;
G empathy : caring, individualised
attention to customers;
G tangibles : for example physical
facilities, equipment, and staff
appearance.
3. Customer service strategy : Most markets
consist of market segments that seek
different combinations of benefits. As not
all customers require the same level of
service, segmentation can be a powerful
means of creating appropriate service
packages for each relevant market
segment.
4. Implementation programme : Once the
most effective service package has been
developed for each segment, the service
package should then become part of an
integrated marketing mix.
Case study : demonstrating
customer service excellence
This type of strategy was used by the
Environmental Health and Trading
Standards (EH&TS) department of the
London Borough of Bromley. In 1999, it won
the Unisys/Management Today Customer
Service Excellence Awards overall honours.
The department was commended for
providing a model of innovative service
provision for private and public sectors alike.
The EH&TS was created to
I ensure that standards of trading in the
borough were fair;
I enhance the environment;
I protect and promote the public health of
the borough’s 300 000 residents and
visitors.
The remit of the EH&TS covers everything
from noisy neighbours to stray dogs, and
demand for its services is increasing. With
only 88 employees and shrinking budgets,
the EH&TS has had to learn how to do more
with less. The answer, says Richard Foulger,
chief environmental health officer, is
innovation.
Innovation describes many aspects of service
provision in this organisation. Over the past
eight years, Foulger and his staff have put in
place the processes, procedures and measure-
ment systems to achieve their goal of Total
Quality Service. The organisation has gained
Chartermark Awards, compliance with ISO
9000, and Investors in People accreditation,
and it recently adopted the Business
Excellence Model in a bid to ensure
consistent standards of service delivery.
Having achieved that consistency, the
EH&TS has turned its attention to develop-
ing new relationships with its customers and
partners. The EH&TS ‘customer base’
includes more than 1000 traveller families,
over 2000 refugees, and an above average
proportion of residents aged 75 or over.
MARKETING
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FACULTY OF FINANCE AND MANAGEMENT MANAGEMENT QUARTERLY PART 10 JANUARY 2001 21
Richard Foulger sums up his ‘service secrets’
(see Management Today (1999)) as follows :
I develop partnerships with other agencies;
I make it easy for customers to give
feedback;
I encourage a ‘just do it’ culture among
employees;
I adopt flexible working practices;
I set stretching goals of service provision.
People strategies
People are increasingly becoming part of the
differentiation through which companies
seek to create added value and gain
competitive advantage. Employees play a
key role in gaining and retaining customers,
by ensuring customer satisfaction and
developing and sustaining long-term
relationships with customers.
It is surprising, therefore, that so few
companies seek to align their internal and
external marketing activities. Too often, the
internal market is considered to be the sole
remit of the human resources department,
while the external market is left to the
marketing department. However, there is a
compelling business case for ensuring that
there is synergy across the spectrum.
The significant role played by people in the
marketing of products and services has led to
a greater interest in internal marketing.
Internal marketing is, essentially, a way of
enabling organisations to recruit, motivate
and retain customer-conscious employees in
order to boost employee retention and
customer satisfaction levels.
Schneider and Bowen, who are leading US
academics in this field, have found that
when employees identify with the norms
and values of an organisation that reflect a
commitment to customer service, they are
less inclined to leave their jobs. This
reduction in employee turnover strengthens
the organisation, and promotes the
transmission of service values to successive
generations of employees. Furthermore,
customers are more likely to be pleased
with the service they receive from happy,
experienced employees.
Conversely, unhappy, poorly trained and
inexperienced employees invariably lead to
unhappy customers. Employee satisfaction in
internal markets is, therefore, a prerequisite
for customer satisfaction in external markets.
There are two basic rules for successful
internal marketing :
1. Staff must work together across functional
boundaries to ensure that the company’s
mission, strategy and objectives are
served in both policy and practice. Cross-
functional collaboration is particularly
crucial in companies that operate high
levels of direct interaction with
customers.
2. Every employee plays the dual role of
internal supplier and internal customer.
To support and promote external
customer satisfaction, every individual
and department within the organisation
must provide fellow employees and
departments with excellent internal
customer service.
Case study : engaging people
in delivering customer service
excellence
Less than a decade ago, customer service at
the Portsmouth-based operations division of
Alenia Marconi Systems left almost every-
thing to be desired. Customers who sent
their equipment for repair at the company’s
Broad Oak manufacturing site claimed, only
half jokingly, that it would probably be
obsolete by the time they got it back.
Employees were disgruntled and customers
despaired.
Until the mid1990s, employees at Broad Oak
were viewed essentially as a cost, and the
management style was autocratic. Staff
turnover had reached 12% per annum. The
organisation’s decision to apply for Investors
in People accreditation in 1996 marked the
start of a new approach to employee
relations. Broad Oak adopted a 17 point
employee charter that outlined what staff
can expect from the organisation and what
the organisation expects of its employees.
Following a series of initiatives introduced in
early 1997, which included an employee
suggestions scheme, employee satisfaction is
at an all-time high, and staff turnover is
down to 6% per annum.
Better communication between employer
and employees is a feature of Broad Oak’s
new, more open culture. All managers are
now trained in coaching and communica-
tion skills, and each month a team briefing is
given to all staff. Twice a year, the operations
director holds a ‘state of the nation’ event for
the workforce that addresses key issues such
MARKETING
MANAGEMENT QUARTERLY PART 10 JANUARY 2001 FACULTY OF FINANCE AND MANAGEMENT 22
MANAGING THE MARKETING MIX
as people development, business excellence
and company issues.
By aligning its internal and external
marketing strategies, Broad Oak has managed
to reduce leadtimes from 26 weeks to six
weeks and improve productivity from 60%
to 79%. Most importantly, 99.8% of
customers’ products are now returned on
time.
Service secrets (see Management Today (1999))
are
I publicise key performance indicators
widely;
I survey employee opinion to test morale;
I work in partnership with suppliers;
I ensure that staff are multiskilled, to meet
unusual demand;
I train staff in complaint handling
procedures.
Processes
Increasingly, companies are realising that it
is not what they do in the marketplace that is
important, given the ability of competitors
to copy it, but rather the way that they do it.
As a consequence, best practice customer-
focused organisations are moving towards
the adoption of a process orientation. The
process oriented company preserves its
functional excellence in marketing, sales,
operations, and so on, but recognises that it
is the processes that deliver added value to
the customer.
A business process can be defined as any
discrete activity, or group of linked activities,
that adds value to an input. These tend to
I cross functional boundaries;
I often be team-based;
I have strategic goals.
The first step in building a process organisa-
tion is to identify the core business process,
or processes (see Figure 2). These are likely to
be processes
I in which the company has a relative
strength;
I that add significant value;
I that are regarded as fundamental to the
business.
A company should be unwilling to outsource
its core processes, as they can be used to
provide additional customer and shareholder
value.
Relatively few processes genuinely contribute
to core value. Those that do include
I new product development;
I consumer development;
I customer management/key account
management;
I supplier development;
I supply chain management.
Businesses that are not very complex
generally have few core processes, and
even relatively large companies with
comparatively straightforward businesses
may be focused on just one or two processes.
The director of a European distribution
company commented as follows. ‘We have
just two core processes – key account
management and distribution. They drive
our business. We have to get these two right;
everything else flows from that.’
Process organisations identify the core
business processes that deliver value to the
customer, and then build their frameworks
around these processes.
Marketing processes therefore become the
marketing assets of the business, and in the
same way that the directors of a company
sign the annual report and accounts and by
implication agree to safeguard the assets of
the business, marketers become responsible
for safeguarding these processes. It is their
task to protect, nurture and evolve them so
that they continue to deliver sustainable
competitive advantage in the marketplace.
For those companies that are more tradition-
ally organised around functions, managing
the transition from a functional to a process
orientation requires considerable agility on
the part of the organisation. Experience
suggests that three groups of issues are of
paramount importance :
Customer
value
Marketing
Managing
Processes
Figure 2 Managing marketing processes
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MANAGING THE MARKETING MIX
FACULTY OF FINANCE AND MANAGEMENT MANAGEMENT QUARTERLY PART 10 JANUARY 2001 23
I structural issues;
I behavioural issues;
I cultural issues.
One of the first problems that an organisa-
tion encounters in attempting to achieve
this change in orientation is that of how to
manage the tensions between functional
excellence and customer orientation. In
functional structures, the individual
functions may be cost centres or profit
centres. In process organisations, the cross-
functional customer management team
usually assumes some responsibility for
customer profitability. This situation clearly
needs to be resolved.
Behavioural issues may arise where existing
performance measures continue to reward
the old ways of doing things, which may
mean that people can be instructed to act in
one way and find themselves encouraged to
act in another. A familiar example is the sales
team that is told to maximise customer
profitability while being rewarded on the
basis of unit sales. The team will still be
tempted to offer discounts and inducements
to customers, as the overriding message is
‘maximise volume, rather than profits’.
Organisational culture can act as a guide to
organisational behaviour (it defines the way
things get done in an organisation), and it
can also act at an inhibitor to other ways of
doing things. For most people, when they
joined their current organisation and learned
how things got done, this process probably
had more to do with intangible rather than
tangible elements. Examples are the stories
told about the heroes and the bad guys in
the organisation, the logos and symbols that
carry weight, and the power structures.
Understanding the importance of these
intangible elements is the first step towards
achieving cultural change.
Conclusions
Both the parts of this article, which has
detailed the key principles of the individual
elements of the extended marketing mix,
make it clear that each element is a complex
subject in its own right, particularly in
today’s fast-moving business environment.
Unfortunately, it is not possible in practice to
manage each of these as a discrete element in
a linear fashion. They all impact on each
other, and management of the mix is an
iterative process that has to be carried out in
real time. Objectives must be set, resources
allocated, and plans implemented.
Nonetheless, it is possible to draw some
salient conclusions about how to manage the
marketing mix for successful relationship
marketing. Success will depend on taking
each element as the focus of an ongoing
marketing process that should be embedded
within the organisation. The strategy for
each element must be kept under constant
review on the basis of frequent evaluations of
efficiency, effectiveness and sustainability.
References
I ‘Managing the marketing mix 1’
Baker, S Management Quarterly Part 9
(2000) pp 14–20
I The Customer Service Planner
Christopher, M (1992)
I Management Today (September 1999)
Further reading
This article has drawn on the work of
the Cranfield Marketing & Logistics Group
published in Cranfield School of
Management (2000).
Details of the Unisys/Management Today
Customer Service Excellence Awards
scheme for 2001 can be obtained from
[email protected]. The author and
several of her colleagues act as judges for
the scheme.
I Marketing Management : Relationship
Marketing Perspective
Cranfield School of Management (2000)
Macmillan
I ‘Customer service, people and
processes’
Clark, M in Marketing Management :
Relationship Marketing Perspective
Cranfield School of Management (2000)
Macmillan (Chapter 14)
I ‘The communications mix’
Mitchell, H in Marketing Management :
Relationship Marketing Perspective
Cranfield School of Management (2000)
Macmillan (Chapter 13)
I ‘Organizing for relationship marketing’
Ryals, L in Marketing Management :
Relationship Marketing Perspective
Cranfield School of Management (2000)
Macmillan (Chapter 16)
doc_215572155.pdf
The marketing mix provides a way to position a business competitively in its markets. The first part of this article efines and discusses the traditional components of the mix. Each of the 4 Ps (product, price, place, promotion) is viewed, and their places in the marketing mix are illustrated, with well known companies being used as examples.
MARKETING
MANAGEMENT QUARTERLY PART 9 OCTOBER 2000 FACULTY OF FINANCE AND MANAGEMENT 14
MANAGING THE MARKETING MIX
Susan Baker
Lecturer in Marketing,
Cranfield School of
Management
[email protected]
© 2000 Susan Baker
Managing the
marketing mix 1
The marketing mix provides a way to position a business
competitively in its markets. The first part of this article defines
and discusses the traditional components of the mix. Each of
the 4 Ps (product, price, place, promotion) is reviewed, and
their places in the marketing mix are illustrated, with well
known companies being used as examples.
Introduction
The subject of this two-part article is the
creation of customer value through the use
of the expanded marketing mix.
Traditionally, the marketing mix has been
popularly described as the ‘4 Ps’ (product,
price, place, promotion) (see Figure 1).
However, marketers have long been
concerned about the adequacy of these
labels, as the sets of activities that they were
originally introduced to describe have
expanded beyond the boundaries of the
terms. For example, ‘place’ covers the
domain of routes to market, and it now
embraces channel management, logistics
and supply chain management. ‘Promotion’
also more usually refers to the total
communications mix today.
This first part of the article considers each of
the four marketing elements from a relation-
ship marketing perspective, getting to grips
with the differential advantage provided by
each of the individual components.
The second part of the article (to be
published in MQ10) will argue for the
incorporation of three additional
marketing mix elements :
I customer service;
I people;
I processes.
The tenets of relationship marketing
(covered in MQ5 by Mitchell (1999)) are
shown to support the belief that marketing
relies on more than just the creation of
customers and the generation of sales; it also
depends on enduring relationships born of
trust and mutual benefit.
The marketing mix essentially provides
marketers with the necessary levers to
manoeuvre the business into a more
competitive position, and the salient issues
relating to each of the elements are covered
in turn. Complexity arises in managing all of
these together at the same time, and the
concluding section in the second part of the
article therefore provides some cohesive
insights.
Product strategies
The Ansoff matrix was introduced in MQ8
by Palmer (2000) as a marketing diagnostic
tool that has wide application. It is particu-
larly helpful in structuring future product
and market opportunities. In terms of
Classic marketing mix
Place Promotion
Price Product
£$
Figure 1 Classic marketing mix
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FACULTY OF FINANCE AND MANAGEMENT MANAGEMENT QUARTERLY PART 9 OCTOBER 2000 15
product strategy, it is concerned with the
product development process, from the
earliest stages of development through to
the introduction of the product into the
marketplace.
Understanding what is meant by the term
‘new product’ is fraught with difficulties.
For example, is a new product from the
customer’s point of view one that delivers
benefits not previously obtained, or is it one
that delivers them in a more advantageous
way ? Alternatively, from the manufacturer’s
viewpoint, is a new product an established
product with an additional product line
variant that requires separate storage,
handling or management ?
New product development (NPD) has
traditionally been seen as a sequential
process, with functional departments getting
involved at appropriate intervals. The
product is effectively passed from depart-
ment to department. This approach is typical
of a functionally organised, manufacturing
oriented business.
Speed to market is of the essence for
successful NPD. McKinsey & Company has
estimated that high technology products that
arrive to market on time, but are 50% over
budget, earn only 4% less profit over a five
year period. Products that are on budget but
are six months late earn 33% less profit over
the same period.
In the rush to be first and best, the manage-
ment of a number of factors, including the
following, is critical :
I Time to market : How can the
opportunity for profit be maximised ?
I Trend to mass customisation : How can
production costs be driven down while
more individual demands are met ?
I Technology : How can businesses keep
pace with technology ?
In response to these management challenges,
many organisations are now re-engineering
their NPD activities and formalising them
into a structured process.
Robert Cooper, an academic researcher in
this field, has developed the concept of the
stage–gate process (see Cooper (1993)). NPD
activities are formalised and subdivided into
a series of stages, so that managers ‘own’
specific groups of activities, and are
responsible for achieving the objectives
within those activities (see Figure 2). Before it
can progress to the next stage, the product
must be assessed against the objectives set for
that stage. Failure at any stage of the process
results in the conclusion of the development
of the new product.
For pharmaceutical organisations such as
SmithKline Beecham, the fact that they
manage this process in global teams and
work many years in advance of launch onto
Ideation
Gate
4
Gate
5
PIR
Gate
1
Gate
2
Gate
3
Stage
1
Stage
2
Idea
Initial
screen
Preliminary
investigation
Second
screen
Detailed
investigation
(build business
case)
Decision on
business case
Stage
3
Stage
4
Stage
5
Development
Postdevelopment
review
Testing and
validation
Precommercialisation
business analysis
Full production and
market launch
Post-
implementation
review
Figure 2 Stage–gate process
MARKETING
MANAGEMENT QUARTERLY PART 9 OCTOBER 2000 FACULTY OF FINANCE AND MANAGEMENT 16
MANAGING THE MARKETING MIX
the marketplace highlights the importance
of using an explicit and clearly defined
approach. Pilkington (the inventor of float
glass) believes that a benefit of this approach
is that it improves communication between
the various functions.
Product policies, however, do not draw to a
close once a new product has been brought
to market. A new product will most certainly
become part of a range of products and
services marketed by the same firm, and this
raises a number of fundamental questions :
I When should new products be
introduced ?
I When should old products be deleted ?
I Which products should be offered in
which markets ?
I How many products are needed ?
I How should products be differentiated
within the range ?
I How should the range be managed for
continuing profit ?
A key tool for guiding this analysis is the
product profitability lifecycle, which
illustrates profitability over the lifetime of
the product (see Figure 3).
In summary, like other elements of the
marketing mix, product strategies need to be
embedded in the organisation as an ongoing
marketing process.
Pricing strategies
Price is the element of the marketing mix
that has the most direct effect on the bottom
line of the business. Many marketers view
this particular lever as being easy, quick and
flexible to use in the battle to capture
customers. However, using price as the
weapon of choice can lead to price wars
which can have a detrimental effect on
profitability, often for the entire industry
sector.
Additionally, price has become very much a
‘top of mind’ concern for companies seeking
to build online businesses, because, as
everyone knows, the Web allows prices to be
compared much more easily. Customers can
gather information on relative prices,
features and quality in much greater detail
than ever before and far more quickly, with a
few effortless keystrokes. It has become
critical, therefore, that managers be quite
clear about their strategic goals and how they
wish to achieve them when setting price
levels.
It is for these reasons that we should
reconsider some of the fundamentals of
pricing.
Firstly, price plays a pivotal role in marketing
exchanges, and managers need to be aware
of the elements that make up both sides of
the equation for their particular business.
Figure 4 shows the sort of costs that the
customer is interested in. However, all too
often, companies assume that customers are
interested in their costs of doing the business,
and they pursue cost-plus strategies (where a
fixed percentage margin is applied to the
costs of each product).
Too often, companies take a cost-plus
approach to pricing because they are
Research and
product
development
Revenue
Profit
Loss
Profit
Product
introduction
Figure 3 Product profitability lifecycle
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ignorant of the need for a detailed under-
standing of these customer-side elements, or
because a cost-plus strategy has an inherent
appeal as there is usually more certainty
about costs than about demand. Prices
become easier to justify (‘I’ve got to cover all
my costs, after all’), and this approach
should deliver profitability. However, this
approach
I is highly dependent on the correct
allocation of costs within the business;
I ignores customer attitudes to price;
I is completely passive;
I ignores marketing objectives;
I can lead to the sub-optimisation of
profits.
A cost-plus strategy is an ‘inside–out’
approach. A marketing-led pricing policy is
driven from the ‘outside–in’, that is, prices
are set on the basis of an understanding of
what the market will bear. This entails the
gathering of data using techniques that may
range from simple price sensitivity tests to
trade-off analyses where prices are researched
among potential customers for various
bundles of benefits associated with the
product or service under investigation. Most
organisations brief outside research agencies
to carry out this type of work for them.
When entering a market for the first time,
marketers tend to follow one of two
dominant pricing strategies :
I penetration;
I skimming.
It has been suggested that a penetration
strategy (that is, a low relative price) is a
route to early gains in market share if
I demand is price sensitive;
I economies of scale exist;
I competitive imitation is not difficult.
An example of this strategy is the low price
that has been established for initial sales of
domestic television satellite dishes and
decoders.
Alternatively, it is argued, a skimming
strategy (that is, a high relative price) may
be appropriate where
I demand is not particularly price sensitive;
I there is a relatively flat cost curve (that is,
unit costs at low volumes are not very
much higher than unit costs at higher
volumes);
I there is limited danger of competitive
imitation.
In conclusion, the pricing decision is one of
the most important issues to be faced by the
marketer, and it should never be considered
as anything less than strategic in nature.
Place strategies
The outlets at which products are made
available logically determine where
customers buy the company’s products.
Typically, many companies do not give
much attention to the question of channel
choice, as this is not regarded as a variable in
the marketing mix. More often than not, the
distribution channel will have developed its
current form as a result of unplanned and
haphazard development.
As the work of Martin Christopher, a leading
academic in this field, shows (see the further
reading), such disregard for this vital area of
marketing discretion means that many
opportunities for profitable market potential
are passed over.
For instance, an international chemical
company selling into Europe, using its own
sales force to sell direct to customers, found
that by using a chemical merchant, or
middleman, it could reduce its own sales
costs and take advantage of a ready-made
sales organisation with a host of local
contacts.
Figure 4 The pivotal role of price in
marketing exchanges
Consumer costs
Money
Time
Cognitive activity
Behaviour effort
Business costs
Production
Promotion
Distribution
Market research
+ +
Profit Value
= =
Price willing to
pay
Price at which
willing to sell
Marketing
exchange
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MANAGING THE MARKETING MIX
This example demonstrates the benefits of
taking a fresh look at marketing channels,
and in this digital age there are now more
compelling reasons to reappraise channel
strategy. Fundamental to this reappraisal
process is an exploration of the route by
which the customer acquires the product or
service, and a comparison of the costs and
benefits of other distribution options.
Many companies do not rely on a single
channel of distribution, but prefer instead to
use multiple channels. They may choose
different channels to reach different market
segments or, alternatively, they may
approach a single market via a dual
distribution channel.
In such cases, it is important to ensure that
there is no conflict between the channels,
particularly in terms of price competition.
For example, organisations setting up online
channels to complement existing options
need to ensure that established business is
not adversely affected by potentially lower
prices offered through the online channel.
Ultimately, the choice of channel(s) must be
based on the long-term balance between the
benefits and the costs of that choice. What
should be taken into consideration here ?
The potential benefits of using
intermediaries include the following :
I access to markets;
I economies of scale through
consolidation/final product
configuration;
I selling and promotion;
I provision of trade credit;
I holding of inventory;
I installations and customer training.
On the other hand, the costs of using
intermediaries are
I the margin forgone (the channel margin
can be defined as the difference between
the price in the final market and the
price paid to the manufacturer);
I a possible loss of opportunity, as the
intermediary may not necessarily support
or promote the product to the desired
extent because of competing priorities.
For many years, there was little innovation
in distribution channel structure. Organisa-
tions assumed that distribution channels
were, by their very nature, fixed and difficult
to change. However, in recent years, a
number of significant developments have
taken place that are now transforming the
shape of many distribution channels.
The rapid growth of the Internet is a classic
example of how technology is forcing the
pace of change. One of the biggest effects of
Web-based business has been an acceleration
of the trend towards disintermediation, or
the removal of intermediaries between the
supplier and the ultimate consumer.
(Intermediaries have been referred to by one
senior manager as ‘speed bumps on the way
to the consumer’.)
This tendency has significant implications
for business. For example, the traditional
travel industry is under threat from Web-
based businesses that allow consumers to
research, compare information about, and
ultimately book, their own holidays.
The other key development in channel
management is the emergence of world-
wide express delivery services offered by
companies such as DHL and Federal Express.
These have led to the appearance of new
direct-to-customer distribution channels.
Dell Computers, for example, has achieved
a leadership position through the use of
quick response logistics and supply chain
strategies.
The implication of all of this is that channel
strategy must be kept under constant review,
and there must be ongoing evaluation of the
efficiency, effectiveness and sustainability of
current channels. Figure 5 summarises the
key questions that need to be asked.
Promotion strategies
Business today is more communications
dependent than ever before. Over the last
decade, the field of marketing communica-
tions has seen many dramatic changes, not
least of which have been the advancements
in marketing technologies. The Internet,
smart cards, customer databases, easily
accessible data warehousing, and cost-
effective direct mail have all contributed to a
huge increase in the amount of information
exchanged between companies and their
customers.
For example, when Tesco’s loyalty card was
launched in 1995, it was estimated that the
data generated by the company in one
week about its customers’ behaviour was
equivalent to the total amount of
information available on the Internet at that
time.
MARKETING
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FACULTY OF FINANCE AND MANAGEMENT MANAGEMENT QUARTERLY PART 9 OCTOBER 2000 19
These technological advances, coupled with
consumer empowerment, media fragmenta-
tion and the ubiquitous pressure on
marketers to justify the returns on marketing
communications expenditure are intensify-
ing the need to re-examine exactly how
marketers plan and implement their
communications strategies.
As marketers have moved away from
traditional ‘admass’ strategies towards
those that are more personalised, customer
oriented and technology driven, integrated
marketing communications (IMC) has
emerged as a best practice concept.
IMC is defined as the strategic co-ordination
of all marketing messages and the alignment
of all methods of communicating with
customers, be they consumers or other
targeted, relevant (internal and external)
audiences. Marketers aim to achieve both
creative harmonisation and co-ordination of
the promotional tools employed.
In the UK, one brand in particular demon-
strates the process of creative integration. It
also clearly illustrates the marketing thinking
that acknowledges that people form their
images of brands and companies from
information provided through a variety of
Effectiveness:
How well do your channels cover
the market?
How well do your channels meet
your customers’ needs?
Are your channels building a
competitive advantage for you?
Sustainability:
Who ‘owns’ the customer – you or
your channel?
Are your channel partners earning
adequate returns?
Are you participating in channel
innovations?
Channel management
Efficiency:
How competitive is the total system (you and your channel)?
Are you getting the best possible share of the surplus created
in the system?
Figure 5 Key questions in channel management
sources. The brand is Tango, a carbonated
soft drink that for decades languished in the
portfolio of ‘fizzy non-colas’.
In the mid1990s, an innovative IMC
campaign led by the agency HHCL drove the
brand forward, to the extent that, today, the
soft drinks mental map of consumers
comprises colas, fruit-based non-cola drinks,
and Tango. Previously, it consisted of only
two categories : colas and fruit-based non-
colas. Using a suite of media (television and
cinema advertisements, public relations,
trade marketing, and on-pack offers), Tango
conveyed a set of values built around
‘irreverence’ and ‘idiosyncrasy’ that were in
touch with the brand’s consumers.
Making IMC work is a complex business.
Cranfield School of Management research
has shown that marketers overwhelmingly
believe that the orchestrating role has to be
undertaken by the marketers themselves.
Indeed, 60% of research respondents felt that
they could manage an IMC programme more
effectively than their agencies could. It was
the view of some marketers that the
agencies’ obsession with advertising creation
has allowed new competition, in the form of
management consultants, to enter the
marketing communications field.
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MANAGING THE MARKETING MIX
An analysis of the case of Stella Artois, a top
ten UK brand marketed by the Whitbread
Beer Company as a ‘reassuringly expensive’
lager, throws up some of the key issues in
managing an IMC strategy. In 1997,
£25 million was spent on a campaign based
around film (which research had indicated
was an important part of the lifestyle of
Stella’s target consumers : men aged 18–34.).
The main agencies involved were HH&S
(sales promotions), Lowe Howard Spink
(advertising), Motive (media buying), Cohn
& Wolfe (consumer PR) and Bryant Jackson
(trade PR). HH&S were appointed as the lead
agency. All brand activities were focused on
the central proposition, which had delivered
positive sales results. However, managing the
collaborative efforts of such a diverse team
threw up some key issues. These revolved
around the following :
I managing agency egos and turf wars;
I integrating value systems among all the
contributing parties;
I managing remuneration (commission-
based versus fees);
I measuring IMC effectiveness.
In conclusion, IMC moves the concept of
‘promotion’ on considerably, into the 21st
century, where success in communications
strategy lies in the notion of simplicity and
synergy across all activities.
Summary
The description of the classic marketing mix
commonly known as the 4 Ps dominated
marketing thinking for decades, even though
most marketers were aware that the labels
did not quite fit in reality.
With the advent of a relationship marketing
approach to the discipline in the early 1990s,
the classic marketing mix was expanded to
take account of the influence of people,
processes and the provision of customer
service, which were known to play an
equally important role in making marketing
work in practice. These three further
elements will be considered in the second
part of this article.
References
I Winning at New Products : Accelerating
the Process from Idea to Launch
Cooper, R G (1993) Addison–Wesley
(2nd edn.)
I ‘Relationship marketing’
Mitchell, R Management Quarterly Part 5
(1999) pp 16–22
I ‘The marketing toolkit’
Palmer, R Management Quarterly Part 8
(2000) pp 17–24
Further reading
This article has drawn on the work of the
Cranfield Marketing & Logistics Group
published in Cranfield School of
Management (2000). The relevant chapters
are Palmer (2000) (for further reading, see
Cooper (1993) in the above references for
more on the stage–gate process), Christopher,
Chapter 10 (2000) (for further reading,
Martin has written prolifically on this
subject, and I recommend Christopher
(1998)), Christopher, Chapter 11 (2000) (for
further reading, if you want a handbook on
pricing, then try Nagle (1987)) and Mitchell,
H (2000).
I Logistics and Supply Chain Management
Christopher, M (1998) Pitman
I ‘Managing logistics and channels’
Christopher, M in Marketing Management :
Relationship Marketing Perspective Cranfield
School of Management (2000) Macmillan
(Chapter 10)
I ‘Pricing strategy’
Christopher, M in Marketing Management :
Relationship Marketing Perspective Cranfield
School of Management (2000) Macmillan
(Chapter 11)
I Marketing Management : Relationship
Marketing Perspective
Cranfield School of Management (2000)
Macmillan
I ‘The communications mix’
Mitchell, H in Marketing Management :
Relationship Marketing Perspective Cranfield
School of Management (2000) Macmillan
(Chapter 13)
I The Strategy and Tactics of Pricing
Nagle, T (1987) Prentice Hall
I ‘New product development and
product policy’
Palmer, R in Marketing Management :
Relationship Marketing Perspective Cranfield
School of Management (2000) Macmillan
(Chapter 9)
MARKETING
MANAGING THE MARKETING MIX
FACULTY OF FINANCE AND MANAGEMENT MANAGEMENT QUARTERLY PART 10 JANUARY 2001 19
© 2001 Susan Baker
Susan Baker
Lecturer in Marketing,
Cranfield School of
Management
[email protected]
The first part of this article (see Baker (2000)
in MQ9) considered in turn each of the four
elements (known as the 4Ps) that comprise
the classic marketing mix. As a unity, these
provide a way to position a business in its
markets.
This second part of the article brings the
concept of the marketing mix up to date by
introducing three additional elements.
Their inclusion reflects the move to market-
ing strategies founded on building better
relationships rather than simply carrying
out more transactions. Customer service,
people and processes are therefore drawn in
as being levers that are equally important
in manoeuvring a business into a more
competitive position (see Figure 1).
The article concludes with some key insights
into managing the mix as an entity.
Customer service strategies
Companies that excel at customer service
I develop innovations and generate
energies that win new customers while
retaining existing business;
I manage to keep all their customers
satisfied;
I do it better than their rivals.
These are companies that accept that
customers are becoming increasingly
sophisticated and demanding in terms of
their service requirements and expectations.
They realise that increases in customer
satisfaction and retention can have a
significant impact on company profitability
and corporate success.
Despite that fact that customer service can
provide companies with such obvious
advantages, customer care activities generally
do not match either customers’ expectations
or companies’ aspirations. In many
companies, customer care practices amount
to reactive ‘fire fighting’, and customer
service is often seen as the handling of
customer complaints, rather than the
management of customer relationships.
This, of course, assumes that customers
complain in the first place. Studies have
shown that 98% of dissatisfied customers
never complain when they receive poor
service, but that, as a result, 90% of them
will not return to the disappointing supplier
Managing the
marketing mix 2
The marketing mix provides a way to position a business competitively
in its markets. The traditional components of the mix, the 4 Ps, were
examined in the first part of this article. Here the Ps are extended to
include customer service, people and processes. Each of these is
explained as a way of differentiating the company and increasing the
value of its marketing activities.
Customer
service
People
Processes
Product
Promotion Price
Place
Figure 1 The expanded marketing mix
MARKETING
MANAGEMENT QUARTERLY PART 10 JANUARY 2001 FACULTY OF FINANCE AND MANAGEMENT 20
MANAGING THE MARKETING MIX
in future. Furthermore, customers who are
dissatisfied are likely to tell at least ten
others about their poor service experience.
The development of a customer service
strategy involves four key steps, as outlined
by Martin Christopher (Christopher (1992)) :
1. Identifying a service mission : The company
should articulate its service pledge and
values within its corporate mission and/
or in a separate customer service mission
statement. This declaration should focus
on the unique and distinctive elements of
the company’s offer while reflecting the
company’s philosophy and commitment
to customer service.
2. Setting the customer service objectives : The
company’s objectives, or goals, must be
clearly defined and fully understood if
effective strategies are to be developed. In
terms of customer service, this involves
answering questions such as the
following :
G How important is customer service in
comparison with the other elements
of the marketing mix ?
G With what other businesses does the
company compete in the customer’s
mind ?
G Which are the customer service
elements that contribute most to
overall customer satisfaction and
market share ?
G What dimensions of service are seen
as priorities by customers when they
choose suppliers ?
G How does the business perform
against its competition ?
In considering levels of performance in
setting these customer service objectives,
service providers must consider the
importance of service quality variables
such as the following :
G reliability : the ability to perform the
promised service dependably,
accurately and consistently over time;
G responsiveness : prompt service and a
willingness to help customers (speed
and flexibility are essential here);
G assurance : the knowledge and
courtesy of the staff, and their ability
to inspire trust and confidence;
G empathy : caring, individualised
attention to customers;
G tangibles : for example physical
facilities, equipment, and staff
appearance.
3. Customer service strategy : Most markets
consist of market segments that seek
different combinations of benefits. As not
all customers require the same level of
service, segmentation can be a powerful
means of creating appropriate service
packages for each relevant market
segment.
4. Implementation programme : Once the
most effective service package has been
developed for each segment, the service
package should then become part of an
integrated marketing mix.
Case study : demonstrating
customer service excellence
This type of strategy was used by the
Environmental Health and Trading
Standards (EH&TS) department of the
London Borough of Bromley. In 1999, it won
the Unisys/Management Today Customer
Service Excellence Awards overall honours.
The department was commended for
providing a model of innovative service
provision for private and public sectors alike.
The EH&TS was created to
I ensure that standards of trading in the
borough were fair;
I enhance the environment;
I protect and promote the public health of
the borough’s 300 000 residents and
visitors.
The remit of the EH&TS covers everything
from noisy neighbours to stray dogs, and
demand for its services is increasing. With
only 88 employees and shrinking budgets,
the EH&TS has had to learn how to do more
with less. The answer, says Richard Foulger,
chief environmental health officer, is
innovation.
Innovation describes many aspects of service
provision in this organisation. Over the past
eight years, Foulger and his staff have put in
place the processes, procedures and measure-
ment systems to achieve their goal of Total
Quality Service. The organisation has gained
Chartermark Awards, compliance with ISO
9000, and Investors in People accreditation,
and it recently adopted the Business
Excellence Model in a bid to ensure
consistent standards of service delivery.
Having achieved that consistency, the
EH&TS has turned its attention to develop-
ing new relationships with its customers and
partners. The EH&TS ‘customer base’
includes more than 1000 traveller families,
over 2000 refugees, and an above average
proportion of residents aged 75 or over.
MARKETING
MANAGING THE MARKETING MIX
FACULTY OF FINANCE AND MANAGEMENT MANAGEMENT QUARTERLY PART 10 JANUARY 2001 21
Richard Foulger sums up his ‘service secrets’
(see Management Today (1999)) as follows :
I develop partnerships with other agencies;
I make it easy for customers to give
feedback;
I encourage a ‘just do it’ culture among
employees;
I adopt flexible working practices;
I set stretching goals of service provision.
People strategies
People are increasingly becoming part of the
differentiation through which companies
seek to create added value and gain
competitive advantage. Employees play a
key role in gaining and retaining customers,
by ensuring customer satisfaction and
developing and sustaining long-term
relationships with customers.
It is surprising, therefore, that so few
companies seek to align their internal and
external marketing activities. Too often, the
internal market is considered to be the sole
remit of the human resources department,
while the external market is left to the
marketing department. However, there is a
compelling business case for ensuring that
there is synergy across the spectrum.
The significant role played by people in the
marketing of products and services has led to
a greater interest in internal marketing.
Internal marketing is, essentially, a way of
enabling organisations to recruit, motivate
and retain customer-conscious employees in
order to boost employee retention and
customer satisfaction levels.
Schneider and Bowen, who are leading US
academics in this field, have found that
when employees identify with the norms
and values of an organisation that reflect a
commitment to customer service, they are
less inclined to leave their jobs. This
reduction in employee turnover strengthens
the organisation, and promotes the
transmission of service values to successive
generations of employees. Furthermore,
customers are more likely to be pleased
with the service they receive from happy,
experienced employees.
Conversely, unhappy, poorly trained and
inexperienced employees invariably lead to
unhappy customers. Employee satisfaction in
internal markets is, therefore, a prerequisite
for customer satisfaction in external markets.
There are two basic rules for successful
internal marketing :
1. Staff must work together across functional
boundaries to ensure that the company’s
mission, strategy and objectives are
served in both policy and practice. Cross-
functional collaboration is particularly
crucial in companies that operate high
levels of direct interaction with
customers.
2. Every employee plays the dual role of
internal supplier and internal customer.
To support and promote external
customer satisfaction, every individual
and department within the organisation
must provide fellow employees and
departments with excellent internal
customer service.
Case study : engaging people
in delivering customer service
excellence
Less than a decade ago, customer service at
the Portsmouth-based operations division of
Alenia Marconi Systems left almost every-
thing to be desired. Customers who sent
their equipment for repair at the company’s
Broad Oak manufacturing site claimed, only
half jokingly, that it would probably be
obsolete by the time they got it back.
Employees were disgruntled and customers
despaired.
Until the mid1990s, employees at Broad Oak
were viewed essentially as a cost, and the
management style was autocratic. Staff
turnover had reached 12% per annum. The
organisation’s decision to apply for Investors
in People accreditation in 1996 marked the
start of a new approach to employee
relations. Broad Oak adopted a 17 point
employee charter that outlined what staff
can expect from the organisation and what
the organisation expects of its employees.
Following a series of initiatives introduced in
early 1997, which included an employee
suggestions scheme, employee satisfaction is
at an all-time high, and staff turnover is
down to 6% per annum.
Better communication between employer
and employees is a feature of Broad Oak’s
new, more open culture. All managers are
now trained in coaching and communica-
tion skills, and each month a team briefing is
given to all staff. Twice a year, the operations
director holds a ‘state of the nation’ event for
the workforce that addresses key issues such
MARKETING
MANAGEMENT QUARTERLY PART 10 JANUARY 2001 FACULTY OF FINANCE AND MANAGEMENT 22
MANAGING THE MARKETING MIX
as people development, business excellence
and company issues.
By aligning its internal and external
marketing strategies, Broad Oak has managed
to reduce leadtimes from 26 weeks to six
weeks and improve productivity from 60%
to 79%. Most importantly, 99.8% of
customers’ products are now returned on
time.
Service secrets (see Management Today (1999))
are
I publicise key performance indicators
widely;
I survey employee opinion to test morale;
I work in partnership with suppliers;
I ensure that staff are multiskilled, to meet
unusual demand;
I train staff in complaint handling
procedures.
Processes
Increasingly, companies are realising that it
is not what they do in the marketplace that is
important, given the ability of competitors
to copy it, but rather the way that they do it.
As a consequence, best practice customer-
focused organisations are moving towards
the adoption of a process orientation. The
process oriented company preserves its
functional excellence in marketing, sales,
operations, and so on, but recognises that it
is the processes that deliver added value to
the customer.
A business process can be defined as any
discrete activity, or group of linked activities,
that adds value to an input. These tend to
I cross functional boundaries;
I often be team-based;
I have strategic goals.
The first step in building a process organisa-
tion is to identify the core business process,
or processes (see Figure 2). These are likely to
be processes
I in which the company has a relative
strength;
I that add significant value;
I that are regarded as fundamental to the
business.
A company should be unwilling to outsource
its core processes, as they can be used to
provide additional customer and shareholder
value.
Relatively few processes genuinely contribute
to core value. Those that do include
I new product development;
I consumer development;
I customer management/key account
management;
I supplier development;
I supply chain management.
Businesses that are not very complex
generally have few core processes, and
even relatively large companies with
comparatively straightforward businesses
may be focused on just one or two processes.
The director of a European distribution
company commented as follows. ‘We have
just two core processes – key account
management and distribution. They drive
our business. We have to get these two right;
everything else flows from that.’
Process organisations identify the core
business processes that deliver value to the
customer, and then build their frameworks
around these processes.
Marketing processes therefore become the
marketing assets of the business, and in the
same way that the directors of a company
sign the annual report and accounts and by
implication agree to safeguard the assets of
the business, marketers become responsible
for safeguarding these processes. It is their
task to protect, nurture and evolve them so
that they continue to deliver sustainable
competitive advantage in the marketplace.
For those companies that are more tradition-
ally organised around functions, managing
the transition from a functional to a process
orientation requires considerable agility on
the part of the organisation. Experience
suggests that three groups of issues are of
paramount importance :
Customer
value
Marketing
Managing
Processes
Figure 2 Managing marketing processes
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MANAGING THE MARKETING MIX
FACULTY OF FINANCE AND MANAGEMENT MANAGEMENT QUARTERLY PART 10 JANUARY 2001 23
I structural issues;
I behavioural issues;
I cultural issues.
One of the first problems that an organisa-
tion encounters in attempting to achieve
this change in orientation is that of how to
manage the tensions between functional
excellence and customer orientation. In
functional structures, the individual
functions may be cost centres or profit
centres. In process organisations, the cross-
functional customer management team
usually assumes some responsibility for
customer profitability. This situation clearly
needs to be resolved.
Behavioural issues may arise where existing
performance measures continue to reward
the old ways of doing things, which may
mean that people can be instructed to act in
one way and find themselves encouraged to
act in another. A familiar example is the sales
team that is told to maximise customer
profitability while being rewarded on the
basis of unit sales. The team will still be
tempted to offer discounts and inducements
to customers, as the overriding message is
‘maximise volume, rather than profits’.
Organisational culture can act as a guide to
organisational behaviour (it defines the way
things get done in an organisation), and it
can also act at an inhibitor to other ways of
doing things. For most people, when they
joined their current organisation and learned
how things got done, this process probably
had more to do with intangible rather than
tangible elements. Examples are the stories
told about the heroes and the bad guys in
the organisation, the logos and symbols that
carry weight, and the power structures.
Understanding the importance of these
intangible elements is the first step towards
achieving cultural change.
Conclusions
Both the parts of this article, which has
detailed the key principles of the individual
elements of the extended marketing mix,
make it clear that each element is a complex
subject in its own right, particularly in
today’s fast-moving business environment.
Unfortunately, it is not possible in practice to
manage each of these as a discrete element in
a linear fashion. They all impact on each
other, and management of the mix is an
iterative process that has to be carried out in
real time. Objectives must be set, resources
allocated, and plans implemented.
Nonetheless, it is possible to draw some
salient conclusions about how to manage the
marketing mix for successful relationship
marketing. Success will depend on taking
each element as the focus of an ongoing
marketing process that should be embedded
within the organisation. The strategy for
each element must be kept under constant
review on the basis of frequent evaluations of
efficiency, effectiveness and sustainability.
References
I ‘Managing the marketing mix 1’
Baker, S Management Quarterly Part 9
(2000) pp 14–20
I The Customer Service Planner
Christopher, M (1992)
I Management Today (September 1999)
Further reading
This article has drawn on the work of
the Cranfield Marketing & Logistics Group
published in Cranfield School of
Management (2000).
Details of the Unisys/Management Today
Customer Service Excellence Awards
scheme for 2001 can be obtained from
[email protected]. The author and
several of her colleagues act as judges for
the scheme.
I Marketing Management : Relationship
Marketing Perspective
Cranfield School of Management (2000)
Macmillan
I ‘Customer service, people and
processes’
Clark, M in Marketing Management :
Relationship Marketing Perspective
Cranfield School of Management (2000)
Macmillan (Chapter 14)
I ‘The communications mix’
Mitchell, H in Marketing Management :
Relationship Marketing Perspective
Cranfield School of Management (2000)
Macmillan (Chapter 13)
I ‘Organizing for relationship marketing’
Ryals, L in Marketing Management :
Relationship Marketing Perspective
Cranfield School of Management (2000)
Macmillan (Chapter 16)
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